U.S. natural gas futures slid about 3% on Thursday from a 25-month high in the prior session on forecasts for less cold and lower heating demand next week than previously expected.
Extreme cold blanketing much of the country this week boosted heating demand and cut output by freezing oil and gas wells, while at the same time flows to liquefied natural gas (LNG) export plants climbed to a record high.
Thursday’s price decline came despite a federal report expected to show utilities pulled more gas out of storage than usual to heat homes and businesses during frigid weather last week.
Analysts projected utilities pulled 188 billion cubic feet (bcf) of gas out of storage during the week ended February 14. That compares with a drop of 58 bcf during the same week last year and a five-year average draw of 145 bcf for this time of year.
Front-month gas futures for March delivery on the New York Mercantile Exchange fell 10.9 cents, or 2.6%, to $4.171 per million British thermal units (mmBtu) at 8:08 a.m. EST (1308 GMT). On Wednesday, the contract closed at its lowest since December 2022.
Despite Thursday’s price decline, the front-month remained in technically overbought territory for a third day in a row for the first time since October 2024.
SUPPLY AND DEMAND
Financial company LSEG said average gas output in the Lower 48 U.S. states rose to 104.8 billion cubic feet per day (bcfd) so far in February, up from 102.7 bcfd in January when freezing oil and gas wells and pipes, known as freeze-offs, cut production.
That compares with a monthly record of 104.6 bcfd in December 2023.
But with the return of extreme cold that is again freezing wells in some parts of the country, daily output was on track to drop by around 6.7 bcfd since hitting a record high of 106.7 bcfd on February 6 to a preliminary four-week low of 100.0 bcfd on Thursday.
Analysts noted preliminary data is often revised later in the day.
Meteorologists projected weather in the Lower 48 states would remain colder than normal through February 22 before switching to mostly near-normal levels from February 23 to March 7.
With milder weather coming, LSEG forecast average gas demand in the Lower 48 states, including exports, will fall from 147.3 bcfd this week to 127.6 bcfd next week. The forecast for this week was higher than LSEG’s outlook on Wednesday, while its forecasts for next week was lower.
The amount of gas flowing to the eight big U.S. LNG export plants rose to an average of 15.5 bcfd so far in February, up from 14.6 bcfd in January. That compares with a monthly record high of 14.7 bcfd in December 2023.
On a daily basis, LNG feedgas hit a record 16.4 bcfd on Wednesday, topping the prior all-time daily high of 16.2 bcfd on Tuesday.
The LNG daily feedgas record came as flows to Venture Global’s 2.6-bcfd Plaquemines LNG export plant under construction in Louisiana were on track to hit record highs of 1.6 bcfd on Wednesday and Thursday.
The U.S. became the world’s biggest LNG supplier in 2023, surpassing Australia and Qatar, as surging global prices fed demand for more exports, due partly to supply disruptions and sanctions linked to Russia’s 2022 invasion of Ukraine.
Gas was trading at around $15 per mmBtu at the Dutch Title Transfer Facility (TTF) (TRNLTTFMc1) benchmark in Europe and $14 at the the Japan Korea Marker (JKM) (JKMc1) benchmark in Asia.
Source: Reuters